There’s something about dealing with banks that gets us worked up. We have an emotional relationship with them because of the role they play in our lives. If you are unemployed and don’t have access to any form of income, a bank becomes almost a foreign institution — a place for those who have means. If you run a legitimate business or are employed, you develop an almost daily relationship with your bank. For the employed, your salary gets deposited into your bank account each month. For a legit business owner, your transactions run through the banking system.
If you need cash, an ATM operated by a bank is your go-to destination. With electronic transactions dominating trade, payment for your crucial needs requires some form of interaction with a bank-issued card. Banks finance our homes, our vehicles, our businesses; they lend us money and lock us into repayment obligations that can last up to 20 years, if not longer.
In SA, the main criticism levelled at banks is they have created such onerous requirements for access to credit that millions have been shut out as a result.
For example, few people are able to build a home or buy an already built one without the assistance of the financial sector. But the qualifying criteria for a home loan is so strict that workers in lower-income brackets stand next to no chance of being approved for one.
The traditional big four are monopolistic in their practice. They compete on product, price, credit offering and technology. They have designed a financial system that lets in only the lucky few.
The traditional big four are monopolistic in their practice. They compete on product, price, credit offering and technology. They have designed a financial system that lets in only the lucky few.
People in the cash-heavy informal sector have almost no relationship with banks. Entrepreneurs struggle to access credit unless their businesses are instant cash magnets.
Banks even insisted on applying their strict lending criteria to a joint-scheme the state had already committed R200bn to so struggling Covid-19-hit businesses could be rescued. The uptake has been pathetic.
Everyone has some bone to pick with the banks. In politics, banks are the whipping boys of the ultra-left brigade. The EFF wants them nationalised. The ANC faction that aligns with the EFF wants government to start its own.
Former finance minister Tito Mboweni once complained of how a venture he was part of before his second stint in government failed to get off the ground because it couldn’t secure private credit.
No wonder he so enthusiastically supported the idea of a state bank.
“A State Bank is a potential positive disrupter to our financial system. I support its establishment. Finance Kapital (sic) is fundamental to our economic transformation. No debate about that,” he tweeted in February.
At the ANC Lekgotla held on the weekend of September 4, Mboweni’s successor, Enoch Godongwana, presented an economic policy report that gave us the first glimpse of how much this mega-project would cost to get off the ground. R10bn. Read that again: R10bn.
His report doesn’t say how they arrived at that obscene figure or provide any more information on what this beast will eventually morph into. Cabinet has already approved a document on the creation of a state bank. The project is managed by deputy finance minister David Masondo, who is keeping the document under wraps despite repeated requests from yours truly for him to share it with the nation and kick-start the debate.
The governing party always goes to conferences, passes these wish-list resolutions and leaves them to its deployees to figure out implementation without explaining what the end product should look like or how its grand dreams should be financed.
I’m curious to learn more about this bank. It was a resolution of the ANC Nasrec conference in December 2017. The governing party always goes to conferences, passes these wishlist resolutions and leaves them to its deployees to figure out implementation, without explaining what the end product should look like or how its grand dreams should be financed. Passing bizarre resolutions without unpacking or costing them is all part of the factional brinkmanship in that party. We are already stuck with a resolution on free higher education for all. Who is going to fund it when the state is broke is anyone’s guess.
So on the state bank issue; my initial understanding was that they were eyeing the Reserve Bank’s 50% stake in African Bank, as well as assets of Postbank, Land Bank and other state-owned development-finance institutions as an initial base. The central bank acquired the African Bank stake in 2014 to save it from collapsing after its parent company was placed under liquidation as bad debt spiralled. But this equity stake is now in the market. The central bank wants to dispose of it because, as a regulator, it is naturally conflicted. This puts a spanner in the works. Who will purchase this stake? Certainly not government, it doesn’t have the cash. So African Bank is almost off the table.
A bill to create Postbank as a financial service institution has finally been approved, so that’s some progress. Land Bank is in trouble and needs a R5bn rescue. The Industrial Development Corporation is hugely successful at what it does; I’m not sure what role it would play in a state bank set up.
Banks are large and complex organisations. Running them requires deep pockets, deep skills, deep commitment and trustworthy leadership. Why does a state that has failed to run its own companies want to burden itself with the responsibility of managing a bank?
Now that we know the initial set-up price is a staggering R10bn, we have a million other questions. How much will the whole project actually cost? Who is the state bank targeted at? What products will it offer? Who will run it? Who will make sure they don’t steal from it? Who will bail it out when they inevitably do?
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